Sylvamo Corporation · NYSE:SLVM
Sylvamo — Investor Day (September 2021)
69 slides from Sylvamo's investor day presentation, Sep 9, 2021
Slide 1: Investor Day
1 Investor Day September 9, 2021 © 2021International ©2021 Sylvamo Corporation. All rights Paper Company. Allreserved. rights reserved. The World’s Paper Company
Slide 2: Cautionary statement concerning forward-looking statements
Cautionary statement concerning forward-looking statements 2 This presentation contains information that includes or is based upon forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements that do
Slide 3: Statements relating to non-U.S. financial GAAP measures
Statements relating to non-U.S. financial GAAP measures 3 While Sylvamo reports its financial results in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"), during the course of this presentation, certain non-U.S. GAAP financial measures are presented. Manage
Slide 4: Today's discussion leaders
Today’s discussion leaders 4 Jean-Michel Ribiéras John V. Sims Thomas A. Cleves Chairman & Senior Vice President & Senior Vice President, Chief Executive Officer Chief Financial Officer Corporate Affairs 28 years at International Paper 27 years at International Paper 38 years at International Paper
Slide 5: Agenda
Agenda 5 1 Company Overview Jean-Michel Ribiéras 2 Investment Thesis John Sims 3 Regional Overviews Oliver Taudien, Rodrigo Davoli, Greg Gibson 4 Financial Overview John Sims 5 Questions and Answers All 6 Conclusion Jean-Michel Ribiéras © 2021 Sylvamo Corporation. All rights reserved. The World’s Pa
Slide 6: Company Overview
6 Company Overview © 2021 Sylvamo Corporation. All rights reserved. The World’s Paper Company
Slide 7: Sylvamo, a premier uncoated freesheet company
Sylvamo, a premier uncoated freesheet company 7 $3.2 Billion 71% LTM 6.30.21 Sales LTM 6.30.21 Operating Profit in Europe and Latin America $463 Million 70% LTM 6.30.21 Adjusted EBITDA Mill capacity in the lowest-cost regional quartiles $364 Million 3.5 Million LTM 6.30.21 Free Cash Flow Short tons
Slide 8: Why is Sylvamo compelling?
Why is Sylvamo compelling? 8 Commercial Operational Financial Advantages Advantages Focus •Iconic brands with •Low-cost mills in attractive •Robust, resilient free cash strongest brand regions flow recognition •Brazilian forestlands •Debt reduction •Strategic channel •Best-in-class operating •Return
Slide 9: Our three-pronged strategy
Our three-pronged strategy 9 Commercial Operational Financial Excellence Excellence Discipline Be the supplier of choice Operate as a responsible, Be the investment of by leveraging a deep agile and low-cost choice by delivering understanding of end-use company. consistently on our applications and
Slide 10: Uncoated freesheet is sustainable, affordable and functional
Uncoated freesheet is sustainable, affordable and functional 10 Sustainable Affordable Functional • Paper is one of the most recycled materials in the world: 74% - Europe, 67% - Latin America and 66% - North America1 • Results from 33 studies that tested students’ comprehension showed that students
Slide 11: Uncoated freesheet is used across all sectors of the economy
Uncoated freesheet is used across all sectors of the economy 11 North America Western Europe Brazil Healthcare 26% Healthcare 18% Education 32% Financial and insurance 14% Education 13% Professional and technical 16% Education 12% Public administration 12% Information and communication 14% Professio
Slide 12: Uncoated freesheet is the largest and most resilient paper segment globally
Uncoated freesheet is the largest and most resilient paper segment globally 12 UFS has the highest number of end-use applications across multiple industries and segments (notebooks, books, copy paper, letterheads, commercial printing, forms, file folders, etc.) 60,000 50,000 Uncoated Freesheet 000 M
Slide 13: Recovery underway
Recovery underway 13 $709 17.6% $463 $406 $373 $364 $284 14.7% $247 12.4% $190 15.2% 2019 2020 LTM 6.30.21 YTD 6.30.21 Pre-Pandemic Pandemic Adjusted EBITDA Free Cash Flow Free Cash Flow defined as Cash Provided by Operating Activities less Cash Invested in Capital Projects 1 © 2021 Sylvamo Corporat
Slide 14: Global uncoated freesheet producer
Global uncoated freesheet producer 14 $302 Million Segment Operating Profit LTM 6.30.21 North #2 supply position in America Latin North America 29% #1 supply position America 47% in Latin America Europe 24% #3 supply position in Europe #1 supply position in Russia Source: Supply positions from Fishe
Slide 15: Low-cost mills in the most attractive regions
Low-cost mills in the most attractive regions 15 Capacity Sylvamo with Georgetown (Million Short Tons) Mills and Riverdale North America 1.1mm1 Uncoated Freesheet 2.8 3.5 Total 3.5 4.2 Ticonderoga, New York Memphis Europe 1.1mm2 Corporate Headquarters Eastover, South Carolina Svetogorsk, Russia Lati
Slide 16: ESG practices embedded throughout culture and strategy
ESG practices embedded throughout culture and strategy 16 Environmental Social Governance Healthy and productive Employee & Code of Conduct forest ecosystems contractor safety 8 of 9 independent GHG reductions Inclusive workplaces directors Water stewardship Diverse workforces Tale
Slide 17: Strong positions in attractive regions
Strong positions in attractive regions 17 Latin North Europe America America #3 #1 #2 Sylvamo Supply Position #1 in Russia 61% 76% 72% First-quartile Cost Capacity Tres Lagoas low-cost Svetogorsk is Eastover the lowest-cost given contract first-quartile North American mill and tax benefits Source: S
Slide 18: Investment Thesis
18 Investment Thesis © 2021 Sylvamo Corporation. All rights reserved. The World’s Paper Company
Slide 19: Our investment thesis
Our investment thesis 19 The World’s • Be the employer, supplier and investment of choice Paper Company • Believe in the promise of paper to educate, communicate and entertain • Commercial Excellence, Operational Excellence and Financial Discipline Three-pronged • Create long-term value via talented
Slide 20: Demand expected to continue to grow in Eastern Europe and Latin America
Demand expected to continue to grow in Eastern Europe and Latin America 20 • Demand rebounding strongly from 2020 Key Short-term restrictions Pandemic Restrictions Demand Driver • Re-opening of businesses, offices and schools • Impact of work-from-home policies Electronic Substitution • Use of digit
Slide 21: Well-positioned in attractive regions
Well-positioned in attractive regions 21 Europe Latin America North America Bio Pappel 13% Others Others Navigator 19% 19% 24% Suzano Domtar Others PCA 35% UPM 29% 24% 8% 11% Mondi Pixelle Stora 19% 10% Enso 13% Sylvamo Sylvamo Sylvamo 34% 28% 14% 2021 – 2025 Projected Demand CAGR Eastern Europe 0.2
Slide 22: Iconic brands
Iconic brands 22 Russia Europe Latin America North America Global SvetoCopy has the highest The conscious-choice Chamex has strongest Hammermill Paper is the Exclusive global supplier of frequency of repeat brand for European brand recognition in Latin brand most purchased by one of the most-recogni
Slide 23: Long-term, committed partnerships
Long-term, committed partnerships 23 Customer (Years of partnership) Europe Finsib 10+ 10+ 10+ 20+ 25+ Latin America 10+ 20+ 15+ 10+ 20+ North America 5+ 100+ 20+ 30+ 100+ • Top 10 customers represent ~1/3 of net sales with average partnership tenure of ~50 years • No one customer makes up more than
Slide 24: Well-maintained, low-cost mills
Well-maintained, low-cost mills 24 1250 Brazilian domestic tax incentive and other rights make Três Lagoas cost-competitive globally 1000 More than 70% of capacity in the lowest Cash Cost Per Short Ton quartiles of global and regional cost curves 750 500 250 0 10 20 30 40 50 Cumulative Million Tons
Slide 25: Volume and price recovery in progress
Volume and price recovery in progress 25 Business Segment Operating Profit $ Million $169 $42 Shows the initial $71 $87 recovery from the pandemic restrictions $46 $29 $40 ($4) YTD 6/30/20 YTD 6/30/21 North America Latin America Europe © 2021 Sylvamo Corporation. All rights reserved. The World’s Pap
Slide 26: Recovery underway
Recovery underway 26 $709 $ Million 17.6% $463 $406 $373 $364 $284 14.7% $247 12.4% $190 15.2% 2019 2020 LTM 6.30.21 YTD 6.30.21 Pre-Pandemic Pandemic Adjusted EBITDA Free Cash Flow Free Cash Flow defined as Cash Provided by Operating Activities less Cash Invested in Capital Projects © 2021 Sylvamo
Slide 27: Key competitive advantages
Key competitive advantages 27 Attractive regions Low-cost mills Iconic brands Committed channel partnerships Talented teams Robust, resilient free cash flow © 2021 Sylvamo Corporation. All rights reserved. The World’s Paper Company
Slide 28: Regional overviews
Regional overviews 28 Oliver Taudien Rodrigo Davoli Greg C. Gibson Senior Vice President & Senior Vice President & Senior Vice President & General Manager, Europe General Manager, Latin America General Manager, North America 26 years at International Paper 28 years at International Paper 39 years at
Slide 29: #3 supply position in Europe; #1 position in Russia
#3 supply position in Europe; #1 position in Russia 29 Others 19% Navigator 24% UPM $940 Million 11% LTM 6.30.21 Sales Mondi 19% Stora Enso 13% Sylvamo 14% Source: Supply positions from Fisher International as of December 2020 © 2021 Sylvamo Corporation. All rights reserved. The World’s Paper Compan
Slide 30: Key strategic advantages in Europe
Key strategic advantages in Europe 30 23-year successful track record of operating in Russia Strong and steady cash flow generation over time SvetoCopy - Strong supply position and brand loyalty First branded office paper produced in Russia Svetogorsk - 1st-quartile mill that serves Russia and expor
Slide 31: Favorable European industry supply and demand dynamics
Favorable European industry supply and demand dynamics 31 Eastern Europe Capacity Demand Western Europe Capacity Demand 2014 - 2019 0.7% (0.6%) 2014 - 2019 (2.4%) (2.8%) 2021 – 2025 (2.6%) 0.2% 2021 – 2025 (5.7%) (2.7%) 10,000 W. Europe Capacity W. Europe Demand E. Europe Capacity E. Europe Demand 8
Slide 32: European Covid-19 impact and outlook
European Covid-19 impact and outlook 32 Eastern Europe Western Europe • Less-significant impact on 2020 UFS • More significant impact on 2020 UFS demand (9%) demand (14%) • Strong recovery in 2021 • Strong recovery in 1H21 driven by GDP growth and reopening of schools • Solid GDP growth expected to
Slide 33: Commercial advantages in Europe
Commercial advantages in Europe 33 Iconic Mill Brand & Exclusive HP Brand Antalis, Europapier, Finsib, Inapa, Winning Customers Komus, Lyreco, Tetra Pak and others Attractive Segments Digital printing, premium grades e-commerce and retail for work-from-home, New Approaches / Channels Paper as a Serv
Slide 34: European mills
European mills 34 Capacity (Million Short Tons) UFS 0.4 • Copy Paper Svetogorsk • Coated Paperboard Total 0.7 • Market Pulp • Copy Paper UFS 0.3 • Premium Laser Saillat • Premium Inkjet Total 0.4 • Colors • Market Pulp © 2021 Sylvamo Corporation. All rights reserved. The World’s Paper Company
Slide 35: #1 supply position in Latin America
#1 supply position in Latin America 35 Bio Pappel 13% Suzano 29% Others 24% $705 Million LTM 6.30.21 Sales Sylvamo 34% Source: Supply positions from Fisher International as of December 2020 © 2021 Sylvamo Corporation. All rights reserved. The World’s Paper Company
Slide 36: Key strategic advantages in Latin America
Key strategic advantages in Latin America 36 Chamex - Leading brand in Latin America 25% supply position Exports to a majority of Latin American countries U.S. Dollar revenues provide a natural currency hedge Three global low-cost mills with ability to ship globally High margins generate substantial
Slide 37: Favorable Latin American industry supply and demand dynamics
Favorable Latin American industry supply and demand dynamics 37 Latin America Capacity Demand 2014 - 2019 (0.3%) (3.1%) 2021 – 2025 (1.6%) 2.2% Capacity Demand 6,000 Global low-cost position allows all Sylvamo 000 Metric Tons Brazilian mills to run at full capacity 4,000 3,225 2,818 2,000 2014 2015
Slide 38: Latin American Covid-19 impact and outlook
Latin American Covid-19 impact and outlook 38 • Significant UFS demand decline in 2020 driven by pandemic restrictions • Paper for schools and offices the most impacted segments • Schools and offices reopening across Latin America as of August 2021 • Vaccination rates improving • Strong 2021 GDP dri
Slide 39: Commercial advantages in Latin America
Commercial advantages in Latin America 39 Iconic Mill Brands & Exclusive HP Brand Acco Brands, CMPC, Kalunga, Nagem, Winning Customers Oji Papers, Perez Trading, and others Attractive Segments Specialized Retail, Digital Printing, Industrial Conversion New Approaches / Channels Innovative Products,
Slide 40: Global low-cost Latin American mills
Global low-cost Latin American mills 40 Capacity (Million Short Tons) UFS 0.4 • Copy Paper Luis Antonio • Offset Total 0.5 • Market Pulp UFS 0.5 • Copy Paper Mogi Guacu • Offset Total 0.5 • Market Pulp UFS 0.3 • Copy Paper Tres Lagoas • Offset Total 0.3 © 2021 Sylvamo Corporation. All rights reserve
Slide 41: Our eucalyptus plantations are a key advantage
Our eucalyptus plantations are a key advantage 41 Own 100,000 hectares of forestland • 75,000 hectares of eucalyptus trees • 25,000 hectares of protected forests Plant 14 million seedlings per year 80% fiber self-sufficient 80 kilometer (50 miles) average haul distance © 2021 Sylvamo Corporation. Al
Slide 42: #2 supply position in North America
#2 supply position in North America 42 Others 19% PCA 8% Domtar 35% $1,559 Million LTM 6.30.21 Sales Pixelle 10% Sylvamo 28% Source: Supply positions from Fisher International as of December 2020 © 2021 Sylvamo Corporation. All rights reserved. The World’s Paper Company
Slide 43: Key strategic advantages in North America
Key strategic advantages in North America 43 Strong supply position all major UFS segments Coverage across multiple end-use applications through various channels Strong portfolio of iconic brands and private label products Hammermill brand associated with quality and willingness to pay Attractive po
Slide 44: Favorable North American industry supply and demand dynamics
Favorable North American industry supply and demand dynamics 44 North America Capacity Demand 2014 - 2019 (3.1%) (3.5%) 2021 – 2025 (1.7%) (2.6%) Capacity Demand 10,000 8,000 000 Metric Tons 6,000 5,657 5,298 4,000 2,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Pre-Pandemic Pandem
Slide 45: North American Covid-19 impact and outlook
North American Covid-19 impact and outlook 45 • 18% North American UFS demand decline in 2020 • Demand improving and continues to gain momentum • Not all UFS segments recovering at the same rate • Advertising and direct mail leading the way • Copy paper improving, but has not recovered as quickly •
Slide 46: Commercial advantages in North America
Commercial advantages in North America 46 Iconic Mill Brand & Exclusive HP Brand Amazon, Central National Gottesman, Winning Customers Staples, and others Attractive Segments Books on Demand, Digital Printing New Approaches / Channels e-commerce, Paper as a Service, End-user Selling Innovation Produ
Slide 47: Growing position in North American e-commerce channel
Growing position in North American e-commerce channel 47 Projected e-commerce CAGR1 2017 – 2023 • Sylvamo sales growth outperforming the category Outpaced • Sylvamo e-commerce sales ~10% of North American 46% Growth 8% sales, up ~85% since 2016 Sylvamo Office Supplies Sales Sales Strong • Hammermill
Slide 48: North American mills
North American mills 48 Capacity (Million Short Tons) • Copy Paper UFS 0.7 • Envelope Eastover • Forms • Offset Total 0.8 • Market Pulp UFS 0.3 • Premium Color Copy • Premium Laser Copy Ticonderoga • Opaques Total 0.3 • Colors UFS 0.1 • Bristols • Colors IP Georgetown • Envelope Total 0.3 • Specialt
Slide 49: Financial Highlights
49 Financial Highlights © 2021 Sylvamo Corporation. All rights reserved. The World’s Paper Company
Slide 50: Recovery accelerating
Recovery accelerating 50 $ Million Net Sales Adjusted EBITDA & Margin $4,017 $3,156 $709 $3,009 $463 $1,622 $373 $1,475 $247 $157 17.6% 12.4% 14.7% 10.6% 15.2% 2019A 2020A LTM 6/30/21 YTD 6/30/20 YTD 6/30/21 2019A 2020A LTM 6/30/21 YTD 6/30/20 YTD 6/30/21 © 2021 Sylvamo Corporation. All rights reser
Slide 51: Recovery – LTM total operating profit up 48% vs. 2020
Recovery – LTM total operating profit up 48% vs. 2020 51 • As of the second quarter, all Sylvamo mills currently running $ Million at full capacity • Realization of prior price increases rolling into 2021 $75 ($39) results $3 $302 $37 • Expect continued volume and $204 $22 price/mix realizations in
Slide 52: Initial debt structure
Initial debt structure 52 Source of Capital $ Million Interest Rate $450-million Revolving Credit Facility $100 LIBOR + 1.75% (with $100 million drawn on spin date) 6-year Secured Farm Credit Term Loan F $520 LIBOR + 1.90% (Eligible for an annual rebate) 7-year Secured Term Loan B $450 LIBOR + 4.5%
Slide 53: Guidance – selected 4Q21 metrics
Guidance – selected 4Q21 metrics; our first quarter as an independent company 53 $ Million 4Q21E Comments Costs associated with the separation, including initial One-time Costs $23 information technology set-up costs and restructuring costs Transition Services provided for information technology, pa
Slide 54: Guidance – selected metrics
Guidance – selected metrics 54 $ Million 2018 2019 2020 2021F 2022E 2023E 2024E Maintenance Outage Expense $55 $62 $46 $71 $58 Maintenance, Regulatory $134 $115 $74 $90 $145 & Reforestation Other Capital $16 $3 $1 - - Capital Expenditures Svetogorsk Recovery Boiler - - - - $15 $75 $100 Total $150 $1
Slide 55: Guidance – contingent tax liability
Guidance – contingent tax liability 55 Brazilian tax authorities have disputed the deductibility of goodwill from IP’s 2007 acquisition of the Luis Antonio mill • No liability has been recorded since we and our advisors believe IP has a strong position • If, prior to the spin-off, the Brazilian gove
Slide 56: Guidance – financial discipline
Guidance – financial discipline 56 •Strong balance sheet across economic cycles Cash Culture •Focus on cash generation •Target high-return, short-payback investments • Target Gross Debt-to-Adjusted EBITDA ratio of < 2.5X Leverage and Liquidity • Target minimum cash balance of $100 million • Achieve
Slide 57: Questions & Answers
57 Questions & Answers © 2021 Sylvamo Corporation. All rights reserved. The World’s Paper Company
Slide 58: Wrap Up and Thank You
58 Wrap Up and Thank You © 2021 Sylvamo Corporation. All rights reserved. The World’s Paper Company
Slide 59: Why is Sylvamo compelling?
Why is Sylvamo compelling? 59 Focused on Free Cash Flow Generation and Shareowner Value Creation Commercial Operational Financial Advantages Advantages Focus • Iconic brands with strongest • Low-cost mills in attractive • Robust, resilient cash flow brand recognition locations • Focus on strong bala
Slide 60: Appendix
60 Appendix © 2021 Sylvamo Corporation. All rights reserved. The World’s Paper Company
Slide 61: The Sylvamo Promise
The Sylvamo Promise 61 We believe in the promise of paper to educate, communicate and entertain. Paper connects us to one another and is an enduring bond to renewable natural resources. Our purpose is to produce the paper you need in the most responsible and sustainable ways. We aim high, innovate,
Slide 62: Vision, Mission and Values
Vision, Mission and Values 62 To be the world’s paper company: the employer, supplier, and investment of choice Vision We transform renewable resources into papers that people depend on for education, communication and entertainment Mission We always do the right things, in the right ways, for the r
Slide 63: Key covenants of credit agreement
Key covenants of credit agreement 63 Annual Cash Restrictions until Resolution of the Brazilian Tax Dispute Restricted Equity Restricted Debt Restricted Leverage Ratio Payments Payments Investments1 2.5X or Higher $25 million < 2.5X $50 million < 2.0X $75 million There are no restrictions on the rep
Slide 64: Recovery in progress
Recovery in progress 64 Business Segment Net Sales1 Business Segment Operating Profit ($ Million) ($ Million) Margin $498 12% $4,087 Year-over-Year Pandemic Impact $200 10% $3,043 (26%) $1,996 Year-over- Year Initial $1,490 (25%) Recovery Margin $1,646 11% $204 7% Margin $158 12% $969 $169 10% $43 3
Slide 65: Historical data
Historical data 65 Net Sales Adjusted EBITDA & Adjusted EBITDA Margin $4,119 $4,017 $788 $3,009 $3,156 $709 $463 $373 19.1% 17.6% 12.4% 14.7% 2018A 2019A 2020A LTM 6/30/21 2018A 2019A 2020A LTM 6/30/21 Adjusted EBITDA Adjusted EBITDA Margin Capital Expenditures Free Cash Flow1 $439 $406 $150 $364 $1
Slide 66: Operating profit reconciliation
Operating profit reconciliation 66 Six Months Six Months $ Million 2018 2019 2020 LTM 6.30.21 ended 6.30.20 ended 6.30.21 Income (Loss) $573 $502 $198 $371 $67 $240 before Income Taxes Interest (Income) Expense, Net (7) (9) (4) (32) (1) (29) Restructuring and Other Charges, Net 4 6 - - - - Other Spe
Slide 67: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation 67 Pro Forma LTM $ Million 2018 2019 2020 2020 6.30.21 Notes Net Income $419 $377 $170 $56 $293 Equity- based Compensation during the periods presented is a non-cash item attributable to direct Company employees Depreciation, Amortization, Cost of Timber Harvested 198
Slide 68: Free cash flow reconciliation
Free cash flow reconciliation 68 Six Months Six Months LTM $ Million 2018 2019 2020 ended ended 6.30.21 6.30.20 6.30.21 Cash Provided By (Used For) $589 $524 $359 $429 $152 $222 Operating Activities Adjustments Cash Invested in Capital Projects (150) (118) (75) (65) (42) (32) Free Cash Flow $439 $40
Slide 69: Management discussion and analysis
Management discussion and analysis 69 $ Million 2018 2019 2020 Net Sales $4,119 $4,017 $3,009 % growth (2%) (25%) Cost of Products Sold 2,620 2,638 2,101 % of net sales 64% 66% 70% Gross Profit $1,499 $1,379 $908 Selling, General and Administrative Costs 288 262 209 Depreciation, Amortization, Cost